Reviving the MSE

The Madras Stock Exchange could improve access to credit for small and medium enterprises

The Madras Stock Exchange was set up in 1937. It celebrated its 75th  anniversary recently. Many large Chennai-based businesses such as the TVS group, Ashok Leyland, India Cements, Madras Cements, Amrutanjan and others raised finance through the MSE. One of the oldest regional exchanges in the country,  MSE started fading around the mid-nineties and became inactive in 2005. This is the story of many regional SEs, all of which became irrelevant when trading terminals of the NSE and BSE went nationwide. Of the 19 regional stock exchanges in India, five are no longer recognised by Sebi.

There is now serious talk of reviving the MSE. Its members are working on a turnaround plan to reactivate its trading activities. V Nagappan, member of the advisory committee, of MSE, notes that the exchange has entered into an arrangement with the NSE that shall allow MSE  members to trade on NSE's platform. Already 60 companies have been included for trading on the NSE platform and more companies will be covered. According to S Venkateswaran, Director of MSE, there are 1,150 companies listed on the exchange. Out of these, 600 are not listed on the NSE or BSE. With the revival of the MSE trading platform, shareholders in these unlisted companies will have access to liquidity for their holdings.

In 2005, Sebi allowed exchanges to demutualise, which meant that corporates were allowed to become members. At present, companies like Polaris, Orchid, Aban group and Kalpathi Investments, hold 64% share in the exchange, while the rest is held by trading members of the exchange.  This has brought in a lot of professionalism to the exchange. Sebi has recently announced new norms for stock exchanges. They should have a minimum net worth of R100 crore and should have annual trading volumes of R1,000 crore. If an exchange is not able to achieve the required turnover on a continuous basis and does not apply for voluntary de-recognition, the regulator shall proceed with compulsory de-recognition and expulsion of such a stock exchange.

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